Fake News, Information Herds, Cascades and Economic Knowledge

Abstract

The paper addresses the issue of "fake news" through a well-known and widely studied experiment that illustrates a possible science behind the phenomenon. Public news is viewed as an aggregation of decentralized pieces of valuable information about complex events. Such systems rely on accumulated investment in trust in news sources. In the case of fake news, news source reliability is not known. The experiment demonstrates how fake news can destroy both the investment in trust and also the benefits that news provides. 1 The help of B. Atsavapranee, is gratefully acknowledged. All experimental programs were designed by Travis Maron. The technical contributions of Hsing Yang Lee were very helpful. The financial support of the John Templeton Foundation is gratefully acknowledged.